Dealing With the Euro Crisis Globally
European crisis expands; euro weakens as recovery plans emerge
The Euro zone is faced with economic downfall as efforts to prevent the Greek debt crisis from spreading globally are made. The survival of the global economy is key before the Euro zone suffers from intense debt. This crisis is becoming the talk of the town beyond Europe in hopes of saving the global economy from crashing. Failure to overcome the Greek debt crisis has led President Barack Obama of the US to state that the debt is “scaring the world”, fearing that it may affect a large number of economies around the world.
On the global level, the European economy affects stocks, trade and international banks. Both the US and European stock markets have see-sawed recently, ending with eventual recovery. This leads to thoughts regarding the debt crisis and whether a way out of it is possible in the nearest future. Most stocks are slowly increasing whereas other stocks such as the Dow Jones Industrial continue to fall as plans of solving the Euro zone debt are put forward.
The future of the euro is questioned in this time of severe sovereign debt. This common currency, shared by 17 of the European Union nations is heading downward as it loses its value on the market. The prediction is that the euro crisis will last while gold will increase in value. Regardless, nations will not exit from the euro zone.
The situation for Greece is not optimistic at the moment. The chance of the nation being forced to exit the Euro zone is being considered the sole solution to the crisis although it is unlikely. The consequences of this risky action however could lead to the weakening of other Euro zone members.
Countries, including: Portugal, Italy, Ireland and Spain (known as the PIIGS countries) could follow in Greece’s tracks, leading to a break-up of the once strong Euro zone bonds. The bankruptcy of Greece will put pressure on France and other Northern European countries such as Germany, which the southern European countries already owe money to.
Out of all nations, especially the PIIGS, Italy has the greatest risk for a catastrophe with the highest debt at 1.9 trillion euros, while Germany has been the most successful at staying out of debt. Spain has trouble managing its debt and is also dealing with the highest rate of unemployment in the Euro zone, while Ireland’s main problem at the moment is that it is suffering from a banking crisis which started in 2008 with the Lehman Brothers collapse. This crisis led to recession in Europe calling forth plans to unfreeze numerous global banking markets.
Worldwide, ideas to save the European economy amidst the euro crisis are being planned with several countries including the United States being involved in the recovery efforts. One suggested recovery plan is the European Financial Stability Fund (EFSF) which may be expanded by as much as 1 to 2 trillion euros. Nations of the Euro zone are currently discussing this idea which would result in giving the EFSF greater strength and attention.
It is predicted that the EFSF could aid the struggling nations in raising capital, increasing therefore the chance of survival. Eight of the 17 Euro zone nations have already approved this fund. However, only a unanimous vote of all 17 nations can successfully pass the fund and officially put it into action.
Plans for a common European government are also being analyzed. The German political leaders are discussing the debt crisis, but rule out a common European government stripped of diversity and of national sovereignty. They believe that each nation should deal with its budget independently, regardless of the fact that they are united by the common euro currency.
The future of the Euro zone as a concept is under question as recovery efforts and common issues such as loans and debt come into play. Saving a wide region from debt is an effort which involves the participation of leaders and governments worldwide. A quick recovery is necessary as time is slowly running out and money is being lost. The euro can be saved, but even greater losses can’t be entirely avoided. What was once a strong family of nations may now be falling apart like pieces of a puzzle.
NOTICE: This article was based on research of stock market information and other sources of information, found both online and in print media. Neither StockTips.com nor any of its owners, contributors, officers, directors, consultants, or employees take responsibility for the accuracy of the information contained in this article or the accuracy of the information on which this article was based. StockTips.com was not compensated by any of the companies mentioned in this article for the preparation of this material, nor were the materials approved by the companies which were mentioned.
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